Washington Insider -- Monday

How to Handle Canadian Dairy Policy

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Missouri Files Suit Against USDA Over Crop Insurance Acreage Reporting Deadline

Missouri Attorney General Chris Koster filed suit against USDA July 15 over the agency's refusal to extend the acreage reporting date for crop insurance, citing the heavy rains and flooding that have delayed farmers in the state from planting soybeans in particular.

"Missouri farmers rely on the availability of insurance to guard their crops against events beyond their control," Koster said in a press release. "The USDA should not punish farmers whose planting was delayed by unexpected rain and flooding by enforcing an arbitrary deadline. Millions of dollars in Missouri agriculture is at risk, and we will fight to make sure these resources are protected."

A press release from Gov. Jay Nixon's office on July 15 said 60% of the state's farmers stand to be ineligible for crop insurance due to the situation, saying that as an estimated 1.5 million acres of soybeans have not been planted and only about 40% of Missouri producers have reported their acreage to their county Farm Service Agency.

In a letter to U.S. Ag Secretary Tom Vilsack July 14 requesting the reporting-date extension, Nixon acknowledged even though there is a grace period for acreage reports, "science-based research in agronomics prevents and extension of actual planting deadlines." However, Nixon said, "I respectfully request that USDA-RMA extend the grace period, giving producers additional time needed to accurately report acreage."

RMA has in the past adjusted the reporting date, with the agency taking the action in 2008 when there was widespread flooding in several Midwestern states.

With the final planting dates of June 15 to 30 in Missouri, depending on the county, crop insurance policy terms allow for planting to continue up to 25 days after the final planting date. That would mean anywhere from July 10 to 25, depending on the county. But producers planting during that late planting period do incur a reduction in their coverage levels for each day past that final planting date.

In addition to the public information RMA released relative to the planting situation, the agency has signaled it will help farmers maintain coverage. It's not clear what that means, but does signal some apparent effort by the agency to help affected producers. In addition, contacts note that RMA has been consistent on the issue of planting dates throughout the country, with one pointing out the main reasoning behind not shift on planting dates is that "risks associated with a later crop increase and thus decreased indemnities are appropriate." Given that the late-planting period extends beyond the July 15 acreage reporting date for crop insurance for soybeans in Missouri, it's not clear how that impacts producers who opt to still try to plant a soybean crop for harvest this fall even if it is after the acreage reporting date.

Reconciliation Legislation Seen Slipping to September

The House budget resolution sets July 24 as the deadline for approving a reconciliation bill, a deadline that House Budget Chairman Tom Price, R-Ga., says he doesn't expect to meet.

"What I know as chairman of the Budget Committee is that I've been told not to anticipate marking up a reconciliation bill prior to the August break," Price told reporters last week.

Still, he said he expects Congress eventually will get around to approving a reconciliation measure. Over in the Senate, Majority Leader Mitch McConnell, R-Ky., also told reporters that he was not sure when that chamber would take up the issue or what it might cover. (There are no consequences for missing the deadline).

The budget resolution passed by the House and the Senate earlier this year requires that three House committees and two Senate committees report deficit-cutting legislation to each chamber's budget committee by July 24. Under budget rules, those bills would be combined by each chamber's budget panel and then sent to the floor.

Failure by Congress to pass needed legislation on time is nothing new. But the party that holds the majority in both houses could remove a lot of drama from the budgeting process if its members were able to agree on a way to move forward, and to do so before the start of the next fiscal year on Oct. 1


Washington Insider: How to Handle Canadian Dairy Policy

Recently, the Wall Street Journal took a deep dive into the role of Canadian dairy policy in the Trans-Pacific Partnership (TPP) talks, and concluded that the issue risks being a deal-breaker for Canadian membership.

The United States and other TPP negotiators want Canada to loosen its decades-old system for protecting dairy farmers from imports, the Journal says. It sees the Canadian milk policies as "unfinished business from the 1994 North American Free Trade Agreement (NAFTA) deal, as well as an earlier bilateral free trade agreement with Canada."

In addition, several U.S. senators say they are pushing U.S. Trade Representative Michael Froman to drop Canada from the deal if Ottawa doesn't move to open its dairy and chicken markets, the Journal notes.

This is a tough call for Canadian Prime Minister Stephen Harper who faces an election in October and who obviously doesn't want to lose support in Ontario and Quebec, home to just over 60% of Canada's population -- and a majority of its dairy producers --- and where farmer-voters benefit from artificially high milk product prices under the program.

Other countries in the TPP talks also are looking at the U.S.-Canada milk fight closely, especially New Zealand, which also wants tariffs lifted in the United States. Meanwhile, Washington officials last week flew to Tokyo to seek a deal that would include greater dairy access to Japan.

The proposed TPP would cover countries comprising two-fifths of the world's GDP and the United States and Japan -- the two biggest economies in the group -- have narrowed their differences on agriculture and automobiles to within striking distance. They could shake hands in coming days, the Journal says.

Agriculture is expected to be the biggest winner among traditional U.S. industries in the proposed agreement, so the administration is hoping to leverage the support of farm groups for all it's worth when a TPP deal comes up for a vote, possibly in November or December.

After years of focusing on domestic markets, the U.S. dairy industry changed its policies in recent years to make its products more competitive abroad. Exports more than doubled over the past seven years to $7.25 billion in 2014, the Journal notes, although dairy shipments to Canada, the biggest U.S. trading partner, represent only about a quarter the amount shipped to Mexico.

The Journal notes that Canadian families spend, on average, an additional C$276 each to support the supply-management system, which effectively shuts out competition. For its part, the Canadian dairy industry points to benefits it says that accrue beyond the farm gate. For example, the industry says it supports 215,000 jobs, adds C$18.9 billion to Canada's economy and contributes C$3.6 billion in taxes.

Still, Canadian officials have yet to address concerns raised by the United States and other parties on remaining issues related to Ottawa's tariff regime on dairy, poultry and egg production. Instead, they are expected to wait until the last possible moment before instructing negotiators on what concessions they might make to secure participation in the TPP. Observers note that Ottawa has determined the trade pact is important to pursue given Asia's rising influence in global economic affairs.

Almost nobody thought the TPP would be an easy push -- nor will the next likely effort, either, which would be an attempt to use the TPP as a platform to tackle problems with Asian state-owned corporations. Still, this president, who came into office as a trade skeptic, may be able to point to more progress than many expected, particularly in Asia.

The trade talks are at critical junctures, especially now that President Barack Obama's trade promotion authority has been reauthorized. Thus, the TPP talks and especially this end-game horse trading should be watched carefully as the negotiations proceed, Washington Insider believes.

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